Lackluster jobs report may hurt stocks further
The Labor Department will release its latest jobs report Friday, and analysts say it will probably show that the U.S. failed to create enough jobs in July to reduce unemployment.
Economists surveyed by Bloomberg predict July payrolls climbed by 90,000 workers. That’s on the heels of a paltry 18,000 increase in June, the smallest monthly gain this year. The economists also predict that the jobless rate will remain steady at 9.2%.
The lack of jobs threatens to reduce consumer spending, raising the risk the economic recovery will come to a halt. The inability to reach an accord on raising the debt ceiling and unexpectedly weak growth in the first half of 2011 caused the Standard & Poor’s 500 index to drop 3.9% last week, the most in a year.
“The whole uncertainty we’re seeing right now is going to keep firms cautious and households cautious,” said James Knightly, a senior economist at ING Bank in London. “It’s unlikely anybody is going to go on a hiring binge in that environment. The risk is we see ongoing softness.”
The projected gain in payrolls would bring the average from May through July to 44,000, down from 215,000 in the previous three months.
Increases of around 125,000 a month are needed to keep the unemployment rate steady, while about 200,000 a month would bring it down a percentage point over a year, said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Conn.
Through June, the economy had recovered about 1.77 million of the 8.75 million jobs lost as a result of the 18-month recession that began in December 2007.
In his semi-annual testimony to Congress in July, Federal Reserve Chairman Ben S. Bernanke said the “economy still needs a good deal of support.”
“The most recent data attest to the continuing weakness of the labor market,” Bernanke said. “It’s improving very slowly in terms of jobs regained. Wages are very stagnant and that’s affecting consumer spending and consumer confidence. There is also ongoing uncertainty about the durability of the recovery.”
Some companies are firing workers to keep costs down as the economy slows and uncertainty builds over the debt ceiling, European default risk and regulatory and tax costs.
Cisco Systems Inc., the largest networking-equipment maker, plans to eliminate about 6,500 jobs, or 9% of its full-time global workforce, to help trim $1 billion in annual costs and step up profit growth.
The job cuts will come from across the company and aren’t concentrated in a single unit, company spokeswoman Karen Tillman has said. The company said affected workers in the U.S. and Canada will be notified this week.
Manufacturing, a stalwart of the expansion, grew at a slower pace last month, a report may show Monday. A Bloomberg survey predicts that the Institute for Supply Management’s factory index will fall to 54.5 from 55.3 in June. A reading higher than 50 signals growth.
The view from Sacramento
For reporting and exclusive analysis from bureau chief John Myers, get our California Politics newsletter.
You may occasionally receive promotional content from the Los Angeles Times.